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Iran’s nuclear programme and the battle of the oligarchies

A contest of domestic elites with differing interests and strategic visions is a crucial, neglected element pervading Tehran's nuclear diplomacy.

Now that the nuclear-negotiation deadline of 30 June 2015 has passed, a battle is heating up between Iran and the P5+1 group, where both sides seek to finalise the technical details of the comprehensive agreement. In public statements, United States and Iranian leaders draw red lines seeking to advance their negotiating positions. While these lines are instrumental to the outcome, for Iran they also shed light on the central battle within the Islamic Republic. This conflict is not between hardliners and reformists. Rather, it is a battle between oligarchies, "integrationists" versus "interactionists": two groups with competing political visions and economic interests contending for the future of Iran.

To understand Iran and its forthcoming challenges, overused theocratic analogies should be discarded. Today, Iran most closely resembles post-Soviet Russia where a bankrupt political system, rampant corruption and economic mismanagement have given rise to greater access and opportunity for a divided political oligarchy. To keep the fracturing political elite together over the subsequent three decades, the establishment granted these groups economic privileges allowing them to benefit from their political connections by gaining access to the proceeds from privatisations, tax exemptions, and government contracts. In the process each developed a network of supporters and loyalists.

Despite such privileges, divisions emerged throughout the 1990s under the presidencies of Hashemi Rafsanjani (1989-97) and Mohammad Khatami (1997-2005), both of whom were early advocates of regional and economic integration. To counterbalance the emergence of these political groups, conservatives joined forces with the Iranian Revolutionary Guard Corps (IRGC), thus laying the groundwork for the current oligarchical structure.

In the realm of foreign policy, these groups remained united over the utility of the nuclear programme, believing it would provide Iran with the three pillars of deterrence, strategic leverage and factional unity. When the contested presidential elections of June 2009 led to large-scale public demonstrations, there was concern among scattered political groups - from hardliners to reformists - not to appear too soft or submissive to foreign pressure. Thus they rallied behind the establishment. The nuclear programme had helped bring a fractured elite together again.

The impact of sanctions coupled with profound economic mismanagement, however, began to take its toll on the Iranian economy. By 2012, as oil exports halved, the nuclear programme had proved to be a costly gamble that reinforced international and regional isolation. In these circumstances the establishment’s primal fear became long-term sustainability. The president elected in 2013, Hassan Rouhani, launched a fresh approach of constructive engagement with the international community as the only solution to save the Islamic Republic. The Islamic Republic’s rival elite, unable to blame the "great satan" (that is, the US) for Iran’s economic malaise, reluctantly accepted this initiative. It was agreed that an end to the nuclear standoff, and sanctions relief , would be intrinsic to the survival of the Islamic Republic. At the same time, this plan fuelled new tensions between Iran’s oligarchs and their domestic ambitions.

The sanctions prism

Ultimately, the two groups have differing visions of Iran’s domestic evolution, which can be seen through the prism of the penultimate goal of sanctions relief. It's important to note that this division is not necessarily along hardline versus reformist lines; rather it is about financial empires and billion-dollar oligarchs seeking to secure their long-term interests.

The first group, the integrationists, seek a nuclear deal and sanctions relief as a means to advance their pragmatic, technocratic political and economic agenda. A nuclear deal would allow this group to bring Iran back into the community of nations, thereby reinvigorating the country’s economic prospects through increased foreign investment. In turn, political liberalisation would follow. This platform would weaken their competitors by providing an alternate economic model built upon transparency and integration.  The successful completion of the nuclear negotiations would validate the integrationist vision.

The second group, the interactionists, is composed of conservatives who have built an expansive network of religious and military entities along with vast economic interests. Their success is predicated on their internal network of interactions. This group expanded their economic influence during Mahmoud Ahmadinejad’s presidency (2005-13). The IRGC 's closing of Imam Khomeini airport in 2004 due to its opposition to a Turkish-Austrian contract for the airport’s management was the first of many examples of the group’s economic interference and influence. Ironically, they benefited from international sanctions, which allowed them to monopolise major contracts, mock-privatisations and the import market.

Interactionists are wary of integration, believing international cooperation will in the long run undermine their grip on power and bring about the demise of the Islamic Republic. To them, Iran’s integration into the international economy will trigger the collapse of the Islamic Republic. They perceive this as a part of a "soft coup" that would begin with economic liberalisation, continue to trickle down into society - and end with a complete political transformation. 

But the toll of sanctions has had an impact on this group too. Like their counterparts, they seek sanctions relief - but preferably through the collapse of the sanctions regime. Preventing their integrationist rivals from succeeding is an essential component of their survival. A sanctions collapse would kill many birds with one stone: defeating their domestic political opponents, continuing their economic monopoly with greater access to international markets, preventing western interference, and maintaining their regional strategic influence.     

The veteran diplomat Mohammad Javad Larijani captured this strategy best when he described as dangerous Rouhani’s approach of linking Iran’s economy to foreign investment in order to facilitate integration and "assimilation". In advocating an alternative path, he suggests that, "If we defeat the sanctions, we have achieved the greatest victory that will open many doors to us…through interaction rather than integration".

Herein lies the battle at the heart of the nuclear negotiations, the result of which will have profound implications for the future of Iran. Two competing groups agree on the means of sanctions relief, but differ on the strategic and political ends. But the outcome for these groups will not be a zero-sum game. They both have deep interests and entrenched networks. The international community must learn to live with and do business with interactionists and integrationists alike.

About the authors

Sanam Vakil is an adjunct professor at the Johns Hopkins School of Advanced International Studies in Bologna, Italy. She is the author of Women and Politics in Iran: Action and Reaction (Bloomsbury, 2013)

Hossein Rassam is head of Rastah research and consultancy, and former Iran advisor to the UK's Foreign & Commonwealth Office  (FCO)


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